Sovereign wealth funds (SWFs) from the Middle East are keen to join Europe’s largest corporates and private equity (PE) funds in the top league of dealmakers in the continent, as well as qualifying for the global super-league.

“We have seen many of our SWF clients around the world, including within the Middle East, expand their investment programs in recent years,” according to Isabel Dische, partner at Ropes & Gray and chair of the firm’s alternative asset opportunities group.

A recent example of a deal came in Spain earlier this month. Mubadala Investment Company of the United Arab Emirates (UAE) paid USD 150m (EUR 138m) for a 49% interest in Tubacex’s [BME:TUB] Oil and Gas Tubular Solutions (OCTG) business.

Mubadala was founded in 2017 through the merger of two previous entities. Its predecessor had backed Spanish oil company Cepsa since 1988.

European deals involving SWFs from the Middle East have been tracking up over the past decade, with the pre-pandemic year of 2019 representing a high-water mark of EUR 12bn over ten deals, according to Mergermarket data. Deal volumes came close in 2022 and 2023, with EUR 11.9bn.

The situation is similar for global deals involving SWFs from the region, with a staggering EUR 82bn over 24 deals crossing the line in 2019. However, global volumes dropped dramatically in 2020 (EUR 18bn), only to come back somewhat in the following years, with EUR 56bn in 2021, EUR 45bn in 2022 and EUR 38bn last year.

Going to Wembley

Global SWFs had USD 11.2trn assets under management (AUM) in 2023, according to the 2024 Annual Report from Global SWF.

Five SWFs from oil-rich Gulf states – Public Investment Fund (PIF) from Saudi Arabia, Abu Dhabi Investment Authority (ADIA), Mubadala and ADQ from Abu Dhabi, and Qatar Investment Authority (QIA) from Qatar – are superstars in the top ten.

With global GDP coming in around USD 85tn in 2020, SWFs already control around 13% of the world economy. This percentage is set to grow as investors become increasingly active investors.

Many SWFS are focused on building out their internal capabilities, Dische said, adding that those that historically invested as limited partners (LPs) in funds run by other people are now thinking about in-house strategies, which can leverage the information and relationships they have already built.

“Indeed, we have seen many SWFs realise that for some strategies the breadth of their existing investments may provide a unique competitive advantage and those institutions are mobilizing their investment programs accordingly,” Dische said.

Cup final

European companies that are thinking about SWFs as potential sources of capital include Lifthium Energy of Portugal, which wants to make a total investment of EUR 1bn in two lithium refinery projects. SWFs from the Middle East are increasingly engaging with environmental, social and governance (ESG) issues, as reported.

Meanwhile, non-binding offers for Nord Anglia, which is backed by EQT Private Capital Asia and CPPIB, have attracted SWFs, including ADIA. The UK-based education company could be worth USD 15bn, making it a trophy asset for the successful bidder.

Sub-African advisers are also increasingly seeing SWFs from the Middle East as a source of capital, as reported. One potential deal to watch is West Indian Ocean Cable Company (WIOCC), a telecoms connectivity capacity and solutions provider from Mauritius, which is exploring a capital raise with Lazard. SWFs could be interested, as reported.

With Gulf SWFs slowly beefing up their in-house deal capabilities, promotion to the top league is surely a question of when rather than if, although European foreign direct investment (FDI) rules remain a hurdle in the short term.